Running head: EMOTIONAL AGENCY: WHY SUGARCOATING PAYS? 1. Emotional Agency: Why Sugarcoating Pays? Teck-Hua Ho

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1 Running head: EMOTIONAL AGENCY: WHY SUGARCOATING PAYS? 1 Emotional Agency: Why Sugarcoating Pays? Teck-Hua Ho University of California, Berkeley and National University of Singapore Catherine Yeung National University of Singapore Keywords: happiness, emotion, client and agent interaction, interactive decision making Address correspondence to Catherine Yeung, Department of Marketing, NUS Business School, National University of Singapore, Singapore , cyeung@nus.edu.sg.

2 EMOTIONAL AGENCY: WHY SUGARCOATING PAYS? 2 Abstract Client and agent interactions are prevalent in many social settings. In this paper, a client undertakes a nontrivial task and her performance is disclosed to an agent. The agent must provide feedback to the client to inform her of her performance. Upon receiving the message, the client reports her happiness level. In three studies, we systematically vary the agent s incentive. In the treatment condition, the agent s cash earnings increase linearly with the client s happiness; in the control condition, the agent s earnings are independent of the client s happiness. Focusing on interactive decision making, we simultaneously examine whether and why the agent sugarcoats feedback and how the client responds to the agent s message knowing that her reported happiness can directly influence the agent s earnings. Our experimental results show that the agent sugarcoats feedback, and the strategy pays off because the client mistakenly believes that the sugarcoated message is genuine.

3 EMOTIONAL AGENCY: WHY SUGARCOATING PAYS? 3 Emotional Agency: Why Sugarcoating Pays? In many social settings, a person is privy to knowledge about another person and must provide feedback to that person. Since the former s feedback can significantly affect the latter s emotional state, we label the former as the emotional agent and the latter as the client. 1 There are many real-world examples of such social interactions. A junior colleague provides feedback to a senior colleague about the latter s research paper. The former depends on the latter s support in the future and hence wants to make the latter happy. At the same time, the junior colleague must ensure that his feedback is credible so that the senior colleague believes in and appreciates the feedback. Similarly, a salesperson is asked by a potential buyer about a product s fit. The salesperson wants the potential buyer to be happy so that he can close the deal and make a commission. The potential buyer is keenly aware of the salesperson s incentive and hence may discount his response accordingly. In both examples, the emotional agent is providing feedback to the client with the objective of making the client happy. The client is keenly aware of the agent s incentive and may adjust her emotional response accordingly. This research investigates the strategic interaction between the emotional agent and the client 2 (see Camerer, 2003 for a comprehensive review of experiments involving strategic interactions). 1 For consistency and brevity, we use she to refer to the client and he to refer to the agent. 2 Prior research uses the terms flatterer and ingratiator instead of emotional agent. However, these terminologies imply that the agent always sugarcoats feedback. Since one of our goals is to study whether or not the agent sugarcoats, we use the term emotional agent which we deem as being more neutral.

4 EMOTIONAL AGENCY: WHY SUGARCOATING PAYS? 4 We simultaneously analyze both the agent s and the client s behaviors in the above social settings. In the three reported experiments, the client undertakes a nontrivial task (solving 10 challenging math problems) which earns her $1 for each question answered correctly. The client s performance is made known to the agent. The agent must send a feedback message ( You have got [ ] correct answers. ) to the client. Upon receiving the message, the client indicates her level of happiness on an 11-point scale. We systematically vary the agent s compensation scheme. In the control condition, the agent is compensated only for honest reporting. In the treatment condition, the agent s cash earnings increase linearly with the client s reported happiness so that a higher reported happiness will earn the agent more. In this latter condition, the agent has a well-defined goal, which is to maximize the client s happiness. Note that the client is fully aware of the agent s incentive as well. We investigate whether sugarcoating occurs in such social interaction; if so, whether it pays; and if it pays, why the client responds favorably to the sugarcoated feedback. Theoretical Background Prior research on impression management and ingratiation investigates how a client responds to distorted information provided by an agent. Three types of distorted information are investigated: (1) information about the client s attributes (e.g., how intelligent the agent thinks the client is; Byrne & Rhamey, 1965; Vonk, 2002), (2) information about the agent (e.g., the agent presents himself as being intelligent; Schlenker & Leary, 1982), and (3) information about the agent s opinion on an issue (e.g., how agreeable the agent is with the client; Jones 1965). In this research, we focus on communication and feedback involving the client s information. Prior research in this area shows that such information leads to a client s favorable attitudinal changes when the information praises the client but is not overly exaggerated (Gordon, 1996).

5 EMOTIONAL AGENCY: WHY SUGARCOATING PAYS? 5 Surprisingly, there has been limited research investigating whether agents sugarcoat feedback and how much they sugarcoat in social interaction (Schlenker, 1980; Gordon, 1996). Our research fills this gap by examining the emotional agent s sugarcoating strategy. More importantly, we investigate the agent-client interaction in its naturally occurring form, simultaneously examining both the emotional agent s feedback strategy and the client s corresponding emotional response. (See Andrade & Ho, 2007 and Cain, Loewenstein, & Moore, 2010 for examples of how such an approach can provide a more complete understanding of social interaction.) This approach yields two benefits for this research. First, it provides experimental evidence of the agent s messaging behavior. Most people intuit that, when playing the agent s role, they should provide feedback that is both appealing and credible. However, it is unclear whether people are capable of carrying out this intuition because its successful implementation requires agents to accurately forecast clients likely emotional response to a specific feedback message. Second, our approach has the advantage of using the naturally occurring level of feedback because it is the one that the agent actually uses in a social interaction. If, alternatively, one focuses exclusively on how the client responds to exogenously imposed feedback, there is a danger that the provided feedback may not correspond to an agent s true feedback in a direct social interaction. Strategic Considerations of the Agent and the Client The agent may consider two factors when deciding on a messaging strategy. First, he wants to convey information that is pleasing to the client, so that the client feels happy. At the same time, he should not exaggerate to such an extent that the client finds the message untrustworthy. To understand whether the agent is capable of implementing this balance strategy, it is important to measure the client s expectation of her own performance so that the

6 EMOTIONAL AGENCY: WHY SUGARCOATING PAYS? 6 deviation of the agent s feedback from the client s expectation can be determined. In one of the experiments, we directly measure the client s expectation in order to determine the deviation and use it to assess whether the agent is able to implement this balance strategy. In reporting her happiness, the client may be influenced by three factors. First, the client will report a higher happiness level if she believes she performs well in the mathematics quiz. Second, the client will only believe in the agent s feedback and use it to determine her happiness level if the feedback appears credible. Third, the client may report a higher degree of happiness simply out of altruistic reasons in service of the agent in that the agent earns more money when the client reports being happier. Our experiments examine all three factors and provide evidence on which factor dominates in determining the client s happiness. Overview of Experiments We conduct three experiments using an identical 3-stage paradigm: a task performance stage, a feedback communication stage, and an emotional reaction stage. In the task performance stage, all participants answer 10 SAT-type mathematics questions and earn $1 for each question answered correctly. The participants have no access to their actual performance until the experiment ends. In the feedback communication stage, participants are paired off and are either assigned the role of the emotional agent or the client. The agent in the dyad first receives information about the client s actual performance on the mathematics quiz. The agent will then send feedback to the client by completing the statement, You have correctly answered [ ] questions. This completed statement is sent to the client electronically and anonymously.

7 EMOTIONAL AGENCY: WHY SUGARCOATING PAYS? 7 In the emotional reaction stage, the client indicates how happy she is on an 11-point scale ranging from 0 (not happy at all) to 10 (very happy) upon receiving the feedback. We repeat the feedback communication and emotional reaction stages but then matching each subject with a different partner. Our experimental design ensures that each participant assumes the role of emotional agent and client once and that the order of role assignment is determined randomly. Figure 1 depicts the 3-stage experimental paradigm. In all three experiments, our key dependent variables are (1) the agent s feedback and (2) the client s reported happiness level. We compare these responses between a treatment and a control condition. The experimental procedure is identical for both conditions in each experiment; except that the payment scheme of the emotional agent varies across the conditions. In the treatment condition, the agent s monetary payoff increases linearly with the client s level of happiness. By doing so, we incentivize the agent to put himself in the client s shoes and deliberate on the emotional consequences of receiving certain feedback. Clearly, the agent wants to choose feedback that maximizes the client s happiness and hence his own payoff. The same incentive scheme should also prompt the client to anticipate the agent s strategic motive and calibrate her emotional reaction accordingly. Ex ante, it is unclear sugarcoating will work in this strategic interaction because the client may simply ignore the feedback (knowing that the agent may exaggerate) or may deflate her reported happiness because the agent provides untrustworthy information. In contrast, the client can completely trust the agent s feedback in the control condition because the agent is paid only when he provides an honest feedback. As a consequence, a comparison between the treatment and the control conditions will shed light on how this explicit payment scheme and the associated strategic considerations would affect the way the agent provides feedback and the way the client responds to such feedback.

8 EMOTIONAL AGENCY: WHY SUGARCOATING PAYS? 8 Study 1 Sample and Design One hundred and four undergraduates participated in this experiment. They were paid a show-up fee of $8 plus additional cash earnings contingent on their performance in the experiment 3. Participants on average spent one hour and earned $16. There were two experimental conditions, both followed an identical procedure except on the way the agent was paid. The agent was either paid based on the client s happiness or based on the accuracy of his feedback. For brevity, we refer the former as H-condition (based on happiness) and the latter, the control condition. Procedure Participants were randomly seated at one of the cubicles equipped with a computer. They were informed that they would engage in a mathematics quiz and a feedback communication task and their payment would depend on their actual performance on these two tasks. Participants knew that all communication during the experiment would be made through a web-based computer program, such that interactions between participants would only occur electronically and anonymously. Participants first engaged in a mathematics quiz. They were given 15 minutes to solve 10 SAT-type math problems. The difficulty of the problems was calibrated such that subjects on average answered about five problems correctly. This design provided room for the agent to either inflate or deflate the client s performance in the feedback communication stage. 3 Cash payments were paid in Singapore dollar (1SGD = 0.8USD) in all the experiments reported here.

9 EMOTIONAL AGENCY: WHY SUGARCOATING PAYS? 9 Participants were informed that every correct answer would earn them $1. Their answers were graded electronically, but participants had no access to their actual performance until the end of the experiment. Participants were paired up and engaged in feedback communication about each other s quiz performance. They were informed that they would engage in two rounds of feedback communication, and would be paired with a different participant in each round. In one round, they would act as the agent by providing feedback and in the other round they would act as the client by receiving feedback and reporting their own happiness. The order of their role assignment was determined randomly so that half the subjects acted as the agent first and the other half as the client. The agent then received a report showing how well his client did in the mathematics quiz. He was required to send feedback to his client by completing the statement You have correctly answered [ ] questions. Upon receiving the message, the client indicated how happy she was on an 11-point scale ranging from 0 (not happy at all) to 10 (very happy). This ended the first round of feedback communication. The feedback communication was repeated with each participant matched with a different partner and assumed a different role. When the second round ended, participants were informed of their total payment from the mathematics quiz and the feedback communication task. Participants were paid in cash. Payment scheme. In the H-condition, agents were paid based on their clients reported happiness; each higher scale point yielded an additional 50 cents. In the control condition, agents received a flat fee of $3.0 for conveying accurate (i.e., honest) feedback and received nothing ($0) for inaccurate feedback.

10 EMOTIONAL AGENCY: WHY SUGARCOATING PAYS? 10 To ensure that participants had fully understood the experimental instructions and payment scheme, we administered an understanding check and participants had to answer all the questions correctly before they could participate in the experiment. Results and Discussion Manipulation and confound checks. The top panel of Table 1 summarizes the main results (pooled across the two rounds of feedback communication because they were statistically not different). No sugarcoating behavior was observed in the control condition (i.e., all agents feedback was accurate or honest). Also, participants in the two conditions did not differ in their actual quiz performance (M control = 4.88 and M H = 5.25; F(1, 102) < 1). Therefore, differences in feedback communication could not be attributed to any difference in task performance between the two conditions. Hence, we could use the control condition as a no-sugarcoating baseline. Sugarcoating. In the H-condition, 59.4% of the agents sugarcoated their feedback and the remaining agents honestly reported. The average feedback in the H-condition was 6.97, which was 2.1 higher than that of the control condition (M H = 6.97 vs. M control = 4.88; F(1, 102) = 25.0, p <.001; 2 =.19). The fact that a majority of the agents sugarcoated implies that they believed sugarcoating would yield a higher payoff, despite the fact that their clients might anticipate this strategic behavior and ignore their feedback. Client s Reported Happiness. Clients in the H-condition reported a higher level of happiness than their control group counterparts (M H = 6.25 vs. M control = 4.18; F(1, 102) = 11.60, p =.001; 2 =.09). This higher reported happiness resulted in an average payoff of $3.13. This result implies that sugarcoating pays, because if the agent were to truthfully report, the client

11 EMOTIONAL AGENCY: WHY SUGARCOATING PAYS? 11 would have reported a lower happiness rating of 4.18 (as in the control condition). This would have resulted in a payoff of $2.09, 49.5% lower than the actual payoff of $3.13. This experiment provides the initial experimental evidence that agents sugarcoat their feedback and this strategy leads to a higher payoff. Prior research shows that clients react negatively to feedback when they have reasons to believe that the message might be positively distorted (Fein, Hilton, & Miller, 1990; Gordon, 1996). Our study, however, shows that clients react favorably towards agents feedback even if they are keenly aware that their agents have an incentive to sugarcoat. This raises the important question of why the client would react positively to sugarcoated feedback. There are at least two possibilities. First, the client might genuinely believe in the (sugarcoated) feedback and feel happier about her own (over-reported) performance. This can arise if the client over-estimates her own actual performance and the level of feedback inflation matches the level of over-estimation (Moore & Healy, 2008). We examine this expectation alignment hypothesis in Study 2. Second, the client might report a higher happiness level simply for altruistic reasons (e.g., they want the agent to make more money in the experiment). We examine this altruism hypothesis in Study 3. Study 2 This experiment seeks to explain why the client did not negatively respond to the sugarcoated feedback. We test the expectation alignment hypothesis by asking the client to forecast her own performance before she receives the agent s feedback. Presumably, if the client over-estimates her actual performance and the degree of over-estimation matches the amount of sugarcoating the agent makes, the client will believe in the feedback and report a higher happiness (because of her belief of higher performance in the quiz).

12 EMOTIONAL AGENCY: WHY SUGARCOATING PAYS? 12 Method Eighty participants were randomly assigned to one of the two conditions: the H and the control conditions. The experimental procedure was similar to that employed in Study 1 except that participants in the H-condition were asked to forecast their actual performance immediately after they took the quiz. The prediction was consequential in that an accurate prediction would earn participants an additional payment of 50 cents. Hence subjects were motivated to forecast accurately. Results and Discussion We did the same manipulation checks as in experiment 1 and concluded that the control condition could serve as a useful benchmark to evaluate the H-condition (see middle panel of table 1). Sugarcoating: how it pays and why. In the H-condition, 40% of agents sugarcoated their feedback and the remaining 60% truthfully reported. The average feedback was 6.08, which was higher than that in the control condition of 5.07 (F(1, 78) = 4.07, p =.05; 2 =.04). The client s reported happiness was higher in the H-condition (6.28 vs. 4.25; F(1, 78) = 8.68, p =.004; ; 2 =.09), resulting in a higher payoff for the agent. These results largely replicated findings of study 1. Next, we assessed how close the agent s (sugarcoated) feedback was to the client s forecast of her own performance. At the aggregate level, the agent s average feedback (M = 6.08) was remarkably close to the client s average performance forecast (M = 6.23). To test whether the agent s feedback was close to the client s forecast at the individual level, we computed the difference between the two values for each agent-client pair. The average difference was.15,

13 EMOTIONAL AGENCY: WHY SUGARCOATING PAYS? 13 which was statistically not different from zero (t(39) =.42, p >.50). In addition, we fitted a regression line using the client s forecast as the x-variable and the agent s feedback as the y- variable. The best fitted line that passes through the origin has a slope of.92 (t(39) = 17.84, p <.001, R 2 =.89). This suggests that the agent s feedback aligns almost perfectly with the client s performance forecast (Figure 2 provides a scatter plot of these two variables and the best fitted line). Studies 1 and 2 show the client reports a higher happiness level when the agent sugarcoats even though both parties are keenly aware of the agent s incentive. One competing explanation is that the client is not truly happier but simply wants to be nice to the agent by reporting a higher happiness level (so that the latter makes more money). This explanation is particularly compelling in our setting because it does not cost the client materially to be nice to the agent. Study 3 rules out this altruism explanation. Study 3 To rule out the altruism explanation, we need to have a new control condition where the agent has no incentive to sugarcoat feedback but he is paid based on the client s reported happiness. Study 3 s new control condition will pay the agent based on the client s reported happiness (like the H-condition) but the agent will only receive this payoff if he is honest. This design allows the client to be altruistic in the new control condition since the client can easily increase the agent s earnings by reporting a higher happiness level. If the client is indeed altruistic, one would predict the same level of reported happiness in both the control and H- conditions (since both will lead to higher payoffs for the agent). In fact, one could even argue

14 EMOTIONAL AGENCY: WHY SUGARCOATING PAYS? 14 that a higher happiness level could arise in the new control condition because the client is more certain that the agent is truthfully reporting in this condition. One hundred and sixteen participants were randomly assigned to one of the two conditions: the H and the control conditions. The procedure was similar to that employed in Study 1 except that participants in the control condition were told about the new way they would be paid. Specifically, the agent was told he would earn an extra 50 cents for each additional point on the happiness scale if he was honest. Results Nobody sugarcoated in the control condition. In contrast, 48% percent of agents in the H- condition sugarcoated their feedback and the remaining 52% truthfully reported. The average feedback was 6.47, which was statistically higher than that in the control condition of 4.93 (F(1, 114) = 17.97, p <.001, 2 =.13; see bottom panel of table 1). Are Clients Altruistic? The client s reported happiness was statistically higher in the H- condition than in the control condition (6.33 vs. 4.91; F(1, 114) = 6.01, p =.016; 2 =.04), resulting in a higher payoff for the agent in the former. This result suggests that the client is not being altruistic towards the agent, and we can rule out the altruism hypothesis. Hence we conclude that the client is truly happier as a consequence of the sugarcoated feedback (because she mistakenly believes the feedback is genuine).

15 EMOTIONAL AGENCY: WHY SUGARCOATING PAYS? 15 Discussion This paper investigates whether sugarcoating occurs; if so, whether it pays; and if it pays, why. We make all subjects decisions consequential by tying them to their monetary payoffs. In three closely linked experiments, we show that emotional agents do sugarcoat feedback and it pays for them to do so when their payoff increases linearly with their clients reported happiness. We show that agents receive a higher payoff when they sugarcoat because their clients mistakenly believe their feedback is genuine and hence report a higher level of happiness. This mistaken belief arises because the agents amount of sugarcoating closely matches the degree of clients over-estimation of their own performance. Finally, we rule out the altruism explanation and show that clients are truly happier when their happiness determines their agents monetary payoff. Our research is related to previous work on impression management (Gordon, 1996; Jones 1964). Prior research shows that clients respond unfavorably towards agents feedback when the latter s payoff is saliently linked to the former s emotional reaction (Fein, Hilton, & Miller 1990; Vonk 1998; Campbell & Kirmani 2000). Our research shows that this finding may not generalize to an interactive decision making setting like ours. Furthermore, prior research shows that clients develop favorable response towards agents when their cognitive capacity is constrained (Fein 1996, cf. Vonk 2002; Chan and Sengupta 2010) and when there is a high likelihood of future interaction between the two parties (Vonk 2002). Our research shows that neither cognitive constraint nor interaction expectancy is necessary for clients to develop a favorable response towards agents. In our experiments, clients and agents are not cognitively impaired and their interaction is clearly one-shot (and anonymous). Future research can shed light on why these differences occur.

16 EMOTIONAL AGENCY: WHY SUGARCOATING PAYS? 16 Our research has two limitations. First, our research focuses exclusively on the client s reported happiness immediately after the agent s feedback. In other words, we study the client s short-term happiness. We posit that our result may not generalize to the setting where the agent is paid based on the client s long-term happiness (i.e., emotional response after the client is informed of her actual performance). In this regard, our findings are more applicable to social interactions where it is difficult for the client to find out her true performance (e.g. the stylistic fit of a product) or settings where the short-term happiness is more important than the long-term happiness (e.g., the junior colleague needs the support of the senior colleague in a forthcoming promotion case). Second, our research assumes a one-shot social interaction. If the feedback communication stage is repeated several times between the same agent and client, and actual performance is disclosed to the client each time, then one would expect the client to learn about the agent s tendency to inflate feedback and hence will discount it accordingly. As a consequence, the sugarcoating might not work and pay off in this repeated setting where there is room for learning and reputation building.

17 EMOTIONAL AGENCY: WHY SUGARCOATING PAYS? 17 References Andrade, E., & Ho, T-H. (2007). How is the boss s mood today? I want a raise. Psychological Science, 18(8), Byrne, D., & Rhamey, R. (1965). Magnitude of positive and negative reinforcements as a determinant of attraction. Journal of Personality and Social Psychology, 2(6), Cain, D. M., Loewenstein, G., & Moore, D. A. (2011). When sunlight fails to disinfect: Understanding the perverse effects of disclosing conflicts of interest. Journal of Consumer Research, 37, Camerer C. F. (2003). Behavioral game theory: Experiments in strategic interaction. Princeton: Princeton University Press. Campbell, M. C., & Kirmani, A. (2000). Consumers use of persuasion knowledge: The effects of accessibility and cognitive capacity on perceptions of an influence agent. Journal of Consumer Research, 27, Chan, E. & Sengupta, J. (2010). Insincere flattery actually works: A dual attitudes perspective. Journal of Consumer Research, 47, Fien, S. (1996). Effects of suspicion on attributional thinking and the correspondence bias. Journal of Personality and Social Psychology, 70, Fien, S., Hilton, J. L., & Miller, D. T. (1990). Suspicion of ulterior motivation and the correspondence bias. Journal of Personality and Social Psychology, 58, Jones, E. E. (1964). Ingratiation. NY: Appleton-Century-Crofts.

18 EMOTIONAL AGENCY: WHY SUGARCOATING PAYS? 18 Jones, E. E. (1965). Conformity as a tactic of ingratiation. Science, 149, Gordon, R. A. (1996). Impact of ingratiation on judgments and evaluations: A meta-analytic investigation. Journal of Personality and Social Psychology, 71(1), Moore, D. A., & Healy, P. J. (2008). The trouble with overconfidence. Psychological Review, 115(2), Vonk, R. (1998). Effects of cooperative and competitive outcome dependency on attention and impression preferences. Journal of Experimental Social Psychology, 34, Vonk, R. (2002). Self-serving interpretations of flattery: Why ingratiation works. Journal of Personality and Social Psychology, 82(4), Schlenker, B. R. (1980). Impression management: The self-concept, social identity, and interpersonal relations. Monterey, CA: Brooks/Cole. Schlenker, B. R., & Leary, M. R. (1982). Audience s reactions to self-enhancing, selfdenigrating, and accurate self-presentations. Journal of Experimental Social Psychology, 18,

19 EMOTIONAL AGENCY: WHY SUGARCOATING PAYS? 19 Table 1 Summary of Results (Experiments 1-3): Key Dependent Variables Experiment 1 (n=104): Task Performance Stage No. of correct answers Feedback Communication Stage: Agent s Feedback and Payoff Feedback Sent Monetary Payoff Emotional Reaction Stage: Client s Reported Happiness and Performance Prediction Reported Happiness Prediction Level H condition (n=64) 5.25 (2.22) 6.97 (2.17) 3.13 (1.63) (3.25) Control* (n=40) 4.88 (1.92) 4.88 (1.92) 3.00 ( -- ) (2.61) Experiment 2 (n=80): H condition (n=40) 4.93 (2.45) 6.08 (2.43) # 3.14 (1.64) 6.23 (2.53) # 6.28 (3.27) Control* (n=40) 5.07 (1.98) 5.07 (1.98) 3.00 ( -- ) (2.86) Experiment 3 (n=116): H condition (n=60) 4.92 (1.72) 6.47 (2.17) 3.17 (1.63) (3.26) Control* (n=56) 4.93 (1.69) 4.93 (1.69) 2.46 (1.49) (2.97) Note. The number in each cell shows the mean response and the number in the parenthesis shows the standard deviation *In all the control conditions, the agent received an incentive to provide honest feedback. In experiments 1 and 2, the agent received $3 for providing honest feedback and $0 for providing dishonest feedback. In experiment 3, the agent received 50cents for each higher scale point of happiness reported by the client if the agent provided honest feedback and the agent receives $0 if he provided dishonest feedback. # The client s prediction of her own performance was not statistically different from the agent s feedback, both at the aggregated level and individual level. Refer to text for details of additional statistical tests.

20 EMOTIONAL AGENCY: WHY SUGARCOATING PAYS? 20 Figure 1 The 3-Stage Experimental Paradigm For Experiments 1-3 This figure is constructed using A as the focal participant. A is asked to provide feedback first to participant B and then later receives feedback from a different participant C. Note that each participant s role assignment is randomly determined. Stage 1: Task Performance All participants answer 10 SAT-type math questions. Stage 2: Feedback Communication A sends feedback to B. Stage 3: Emotional Reaction B receives feedback from A. B indicates her happiness.* Stage 2: Feedback Communication C sends feedback to A. Stage 3: Emotional Reaction A receives feedback from C. A indicates her happiness. *B will provide feedback to a different participant in the repetition of the feedback communication and emotional reaction stage.

21 EMOTIONAL AGENCY: WHY SUGARCOATING PAYS? 21 Figure 2 Scatter Plot of Agent s Feedback Against Client s Performance Prediction In Study 2 Feedback = 0.919*Performance Prediction